Why will a perfectly competitive firm not sell its product below the prevailing market price?
A)It faces inelastic demand.
B)It can sell all it wishes at the market price.
C)The sellers in the market have agreed to not sell below a specified price.
D)Its costs would increase dramatically.
E)This would lead to a price war among sellers.

Question

Quizplus · Accepted Answer

A perfectly competitive firm is a price taker, which means it has no influence over the market price. It can sell as much as it wishes at the prevailing market price, but it cannot sell below it because consumers will simply choose to buy from other firms offering the same product at the market price. This is the characteristic of a perfectly competitive market.

Why Will a Perfectly Competitive Firm Not Sell Its Product